<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Texas Utilities Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Texas Utilities Company
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201-3411
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------
April 5, 1999
To the Shareholders of
Texas Utilities Company:
The annual meeting of shareholders of Texas Utilities Company will be held
in the Bass Performance Hall, 4th Street and Calhoun Street, Fort Worth, Texas
on Friday, May 14, 1999 at 9:30 a.m. for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To approve an amendment to the Restated Articles of Incorporation to
increase the number of authorized shares of common stock of the Company
and to effect, at such time, if any, as determined by the Board of
Directors, a split of the issued common stock of the Company by changing
each issued share of common stock into no more than two shares of common
stock; and
3. To approve the selection of auditors for the year 1999.
The Board of Directors has fixed the close of business on March 15, 1999 as
the time as of which shareholders entitled to notice of, and to vote at, the
meeting and any adjournments shall be determined.
Whether or not you will be able to attend the meeting, PLEASE SIGN AND
RETURN THE ACCOMPANYING PROXY PROMPTLY. No postage need be affixed to the
reply envelope which is enclosed herewith for your convenience if it is mailed
in the United States.
Peter B. Tinkham
Secretary
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201-3411
------------------
PROXY STATEMENT
------------------
April 5, 1999
A proxy in the accompanying form is solicited by the Board of Directors of
TEXAS UTILITIES COMPANY for use at the annual meeting of shareholders to be
held in the Bass Performance Hall, 4th Street and Calhoun Street, Fort Worth,
Texas, on Friday, May 14, 1999, at 9:30 a.m. and any adjournments thereof for
the purposes set forth in the accompanying notice.
The close of business on March 15, 1999 has been fixed as the time as of
which shareholders entitled to notice of, and to vote with respect to, this
meeting shall be determined. At such date there were outstanding and entitled
to vote 282,332,819 shares of common stock. Except as indicated below, each
share is entitled to one vote on all matters submitted to shareholders.
Any shareholder may exercise the right of cumulative voting in the election
of directors provided the shareholder gives written notice of such intention
to the Secretary of the Company on or before the date preceding the election.
When exercising this right the shareholder is entitled to one vote for each
share held multiplied by the number of directors to be elected and may cast
all of his votes for a single nominee or spread his votes among the nominees
in any manner desired.
This Notice, Proxy Statement and form of proxy are being mailed or given to
shareholders on or about April 5, 1999.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited by directors, officers and regular
employees of the Company in person or by telephone. The Company has hired D.
F. King & Co., Inc. to assist in the solicitation of proxies at an estimated
cost of $8,000 plus disbursements. Shareholders may assist the Company in
avoiding expenses in this connection by returning their proxies promptly.
1
<PAGE>
Any proxy delivered pursuant to this solicitation is revocable at the option
of the person executing the same at any time prior to the exercise thereof.
The shares represented by any proxy duly given as a result of this request
will be voted in the discretion of the persons named in the proxy unless the
shareholder specifies a choice by means of the ballot space on the proxy, in
which case the shares will be voted accordingly.
The Company has adopted a confidential voting policy. Accordingly,
tabulation of proxies and votes cast at the meeting will be conducted by an
independent agent and the votes of individual shareholders will be kept
private and not disclosed to the Company, except in limited circumstances.
The presence in person or by proxy of the holders of a majority of the
shares of the common stock entitled to vote shall constitute a quorum entitled
to transact business at the meeting. Directors are elected by plurality vote
of the votes cast at the meeting; abstentions and non-votes, as described
below, will have no effect. The approval of the selection of auditors requires
the affirmative vote of a majority of the shares represented at the meeting.
The approval of the amendment to the Restated Articles of Incorporation and
stock split will require the affirmative vote, in person or by proxy, of the
holders of at least two-thirds of the outstanding shares. In both of these
matters, abstentions and non-votes, i.e. shares held by brokers and other
nominees or fiduciaries that are present at the meeting but not voted on such
matter, will be treated as negative votes.
2000 ANNUAL MEETING SHAREHOLDERS' PROPOSALS
All proposals from shareholders to be considered at the next annual meeting
scheduled for May 19, 2000 must be received by the Secretary of the Company,
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201-3411, not later than the
close of business on December 6, 1999.
ELECTION OF DIRECTORS
It is the intent of the Board of Directors that the persons named in the
proxy will vote your shares in favor of the nominees for directors listed
hereafter, unless authority is withheld. All of the nominees are current
members of the Board of Directors and have been nominated by the Nominating
Committee. The persons named in the proxy may cumulate the votes represented
thereby and in case any such nominee shall become unavailable, which the Board
of Directors has no reason to anticipate, may vote for a substitute.
2
<PAGE>
The names of the nominees for the office of director for the ensuing year
and information about them, as furnished by the nominees themselves, are set
forth below:
<TABLE>
<CAPTION>
Served as
Name Age director since Business experience during past five years
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
Derek C. Bonham
(1)(3)(4)(6)........... 55 1998 Chairman of Imperial Tobacco Group PLC since
October 1996; Chairman of The Energy Group
PLC (February 1997--July 1998); prior
thereto Deputy Chairman and Chief Executive
of Hanson PLC (November 1993--February
1997); prior thereto Chief Executive of
Hanson PLC (April 1992--November 1993). A
Director of Glaxo Wellcome PLC, Imperial
Tobacco Group PLC, Newsquest PLC and
Fieldens PLC.
J. S. Farrington
(2)(5)................. 64 1983 Retired Chairman of the Board and Chief
Executive of the Company; Consultant to the
Company since May 1998; prior thereto
Chairman Emeritus of the Company (May 1997--
May 1998); prior thereto Chairman of the
Board of the Company (May 1995--May 1997);
prior thereto Chairman of the Board and
Chief Executive of the Company (February
1987--May 1995); prior thereto President of
the Company (May 1983--February 1987).
William M. Griffin
(1)(3)(4)(6)(7)........ 72 1966 Principal, Griffin, Swanson & Co., Inc.
(investments). Executive Vice President
(until August 1985) and Chairman of the
Finance Committees (until March 1986) of The
Hartford Fire Insurance Company and
Subsidiaries. A Director of The Hartford
Fire Insurance Company (until March 1991)
and Shawmut National Corporation (until
April 1992).
Kerney Laday
(1)(3)(4)(6)(7)........ 57 1993 President, The Laday Company (management
consulting and business development) since
July 1995; prior thereto Vice President,
field operations, Southern Region, U. S.
Customer Operations, Xerox Corporation
(January 1991--June 1995); prior thereto
Vice President and region general manager,
Xerox (1986--1991).
Margaret N. Maxey
(1)(2)(3)(4)(6)........ 72 1984 Director, Clint W. Murchison, Sr. Chair of
Free Enterprise and Professor, Biomedical
Engineering Program, College of Engineering,
The University of Texas at Austin since
1982; prior thereto Assistant Director,
Energy Research Institute, Columbia, South
Carolina (1980--1982).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Served as
Name Age director since Business experience during past five years
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
James A. Middleton
(1)(3)(4)(5)(6)(7)..... 63 1989 Chairman of the Board and Chief Executive
Officer, Crown Energy Company (asphalt
marketing and tar sands processing) since
January 1996; prior thereto Executive Vice
President (October 1987--December 1994) and
Senior Vice President (June 1981--October
1987) of Atlantic Richfield Company.
President, ARCO Oil and Gas Company,
(January 1985--October 1990). A Director of
Crown Energy Company.
Erle Nye
(2)(5)(7).............. 61 1987 Chairman of the Board and Chief Executive of
the Company since May 1997; prior thereto
President and Chief Executive of the Company
(May 1995--May 1997); prior thereto
President of the Company (February 1987--May
1995); Chairman of the Board and Chief
Executive, and a Director, of TU Electric
and ENSERCH Corporation.
J. E. Oesterreicher
(1)(3)(4)(6)........... 57 1996 Chairman of the Board of J C Penney Company,
Inc. (retailer) since January 1997 and Chief
Executive Officer since January 1995; Vice
Chairman of the Board from 1995 to 1997;
President, J C Penney Stores and Catalog
from 1992 to 1995. A Director of J C Penney
Company, Inc. and Brinker International,
Inc.
Charles R. Perry
(1)(2)(3)(4)(5)(6)..... 69 1985 Oil and gas interests, private investments.
Chairman of the Board of Perry Management,
Inc., Avion Flight Centre, Inc. and Perry
Gas Companies, Inc.
Herbert H. Richardson
(1)(3)(4)(5)(6)........ 68 1992 Associate Vice Chancellor for Engineering and
Director, Texas Transportation Institute,
The Texas A&M University System; Associate
Dean of Engineering, Regents Professor and
Distinguished Professor of Engineering,
Texas A&M University; Chancellor, The Texas
A&M University System (1991--1993) and
Deputy Chancellor for Engineering, The Texas
A&M University System (1986--1991).
</TABLE>
- ---------
(1) Member of Audit Committee.
(2) Member of Executive Committee.
(3) Member of Finance Committee.
(4) Member of Nominating Committee.
(5) Member of Nuclear Committee.
(6) Member of Organization and Compensation Committee.
(7) Member of Business Development Committee.
4
<PAGE>
During 1998 the Board of Directors held six meetings. The standing
committees of the Board of Directors and the membership of each committee are
shown on the preceding pages. During 1998 each of the Directors attended more
than 86% of the aggregate of the Board of Directors meetings and the meetings
of the Committees on which they serve.
The Audit Committee nominates to the Board, for approval by the shareholders
at each annual meeting, a firm of independent auditors to audit the books of
account and records of the Company and to perform such other duties as this
Committee may prescribe or approve, receives the reports and comments from
such independent auditors, reviews the adequacy of internal controls, reviews
the accounting principles employed in financial reporting and takes any action
with respect thereto as it may deem appropriate, reports to the Board of
Directors upon its findings and recommendations and performs such other duties
as may be assigned to it from time to time by the Board; the Audit Committee
held two meetings during 1998. The Executive Committee exercises the authority
of the Board in the intervals between meetings of the Board; the Executive
Committee did not meet during 1998. The Finance Committee reviews and
recommends to the Board, for its consideration, major financial undertakings
and policies and performs such other duties as may be assigned to it from time
to time by the Board; the Finance Committee held three meetings during 1998.
The Nominating Committee selects and recommends to the Board, for its
consideration, persons as nominees for election as directors of the Company
and performs such other duties as may be assigned to it from time to time by
the Board; the Nominating Committee held two meetings in 1998. Shareholders
may recommend nominees for directors to the Nominating Committee by writing to
the Secretary of the Company, Energy Plaza, 1601 Bryan Street, Dallas, Texas
75201-3411. The Nuclear Committee reviews, generally oversees, and makes
reports and recommendations to the Board in connection with the operation of
the Company's nuclear generating units; the Nuclear Committee held eight
meetings during 1998. The Organization and Compensation Committee reviews and
establishes the duties, titles and remuneration of officers of the Company;
the Organization and Compensation Committee held two meetings in 1998. The
Business Development Committee reviews and recommends to the Board, for its
consideration, new business opportunities, proposed acquisitions and other
transactions and performs such other duties as may be assigned to it from time
to time by the Board; the Business Development Committee held seven meetings
during 1998.
Directors who are neither officers of nor paid consultants to the Company
were compensated in 1998 by a retainer at the annual rate of $30,000 plus
$1,500 for each Board meeting attended and $1,000 for each committee meeting
attended. Effective April 1, 1998, the annual Board retainer was increased
from $25,000 to $30,000. Additionally, such directors who are members of the
Nuclear Committee and the Business Development Committee received annual
retainers of $10,000 and $3,000, respectively, for their services
5
<PAGE>
on those Committees. Effective April 1, 1998, the annual retainer payable to
members of the Nuclear Committee was reduced from $10,000 to $8,000 and a
retainer of $3,000 was established for members of the Business Development
Committee. Directors who are officers of or paid consultants to the Company do
not receive any fees for service as a director. All directors are reimbursed
for expenses incurred in connection with their services as director. Directors
who are neither officers of, nor paid consultants to, the Company may elect to
defer, in increments of 25%, all or a portion of their annual Board retainer
pursuant to the Deferred Compensation Plan for Outside Directors (Directors'
Plan). Amounts deferred are matched by the Company. Under the Directors' Plan,
a trustee purchases Company common stock with an amount of cash equal to each
participant's deferred retainer and matching amount, and accounts are
established for each participant containing performance units equal to such
number of common shares. Directors' Plan investments, including reinvested
dividends, are restricted to Company common stock. On the expiration of the
applicable maturity period (not fewer than three nor more than ten years, as
selected by the participant) or upon death or disability while serving as a
director, the value of the participant's accounts is paid in cash based on the
then current value of the performance units.
Mr. Bonham serves as a consultant to the Company under an agreement,
providing for annual compensation of Pounds 100,000 (approximately $165,950
based on 1998 year-end foreign exchange rates), administrative support,
transportation expenses and health insurance. This agreement may be terminated
by either party on December 31, 1999, or at any time thereafter.
Mr. Farrington entered into a management transition agreement with the
Company pursuant to which he retired as an active employee of the Company in
May 1998. For his services as an employee of the Company through May 1998, he
received a base salary of $256,638. In accordance with the terms of the
agreement, upon his retirement as an active employee of the Company, Mr.
Farrington will provide consulting services to the Company at an annual fee of
$200,000. The term of this agreement expires on May 31, 2000.
6
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK OF THE COMPANY
Each nominee for director and certain executive officers reported beneficial
ownership of common stock of the Company, as of February 28, 1999, as follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------------
Beneficially Deferred
Name Owned Plans (1) Total
---- ------------ --------- -------
<S> <C> <C> <C>
Derek C. Bonham............................... 1,000 N/A 1,000
J. S. Farrington.............................. 21,362 41,895 63,257
William M. Griffin............................ 30,000 4,419 34,419
Kerney Laday.................................. 1,100 4,419 5,519
Margaret N. Maxey............................. 5,226 6,184 11,410
James A. Middleton............................ 3,000 6,184 9,184
Erle Nye...................................... 76,055 63,306 139,361
J. E. Oesterreicher........................... 2,600 3,251 5,851
Charles R. Perry.............................. 2,000 4,419 6,419
Herbert H. Richardson......................... 1,700 2,576 4,276
David W. Biegler.............................. 152,867(2) 8,277 161,144
H. Jarrell Gibbs.............................. 20,793 27,286 48,079
Michael J. McNally............................ 33,138 17,041 50,179
W. M. Taylor.................................. 20,158 23,789 43,947
All Directors and Executive Officers as a
group (14 persons)........................... 370,999 213,046 584,045
</TABLE>
- ---------
(1) Share units held in deferred compensation accounts under the Deferred and
Incentive Compensation Plan or the Directors' Plan. Although these plans
allow such units to be paid only in the form of cash, investments in such
units create essentially the same investment stake in the performance of
the Company's common stock as do investments in actual shares of common
stock. As a consultant to the Company, Mr. Bonham is not eligible to
participate in the Director's Plan.
(2) Shares reported include 129,778 shares subject to stock options
exercisable within sixty days of the record date.
The named individuals have voting and investment power for the shares of
common stock reported as Beneficially Owned. Ownership of such common stock by
each individual director and executive officer and for all directors and
executive officers as a group constituted less than 1% of the Company's
outstanding shares.
7
<PAGE>
The Company has no knowledge of any person who beneficially owned more than
5% of the common stock of the Company as of December 31, 1998. Mellon Bank,
N.A. (Mellon), held as of such date, in its capacity as Trustee of the
Employees' Thrift Plan of the Texas Utilities Company System (Thrift Plan), a
total of 12,337,548 shares of the Company's common stock, or 4.4% of the
outstanding common shares, of which 7,185,250 shares, or 2.5% of the
outstanding shares, have been allocated to Thrift Plan participants' accounts.
Thrift Plan participants are entitled to direct Mellon as to how to vote
shares allocated to their accounts, and Mellon disclaims beneficial ownership
of such allocated shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires the Company's Directors
and executive officers to file with the Securities and Exchange Commission
(SEC) reports of ownership and changes in the ownership with respect to the
equity securities of the Company. All required forms relating to changes in
beneficial ownership were timely filed except that, as the result of an
inadvertent administrative oversight, a report disclosing the November 1998
open market purchase by Derek C. Bonham of 1,000 shares of the Company's
common stock was not filed until February 1999.
8
<PAGE>
EXECUTIVE COMPENSATION
The Company and its subsidiaries have paid or awarded compensation during
the last three calendar years to the following executive officers for services
in all capacities:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation (2)
----------------------- -----------------------------
Awards Payouts
Other --------------------- -------
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and Salary Bonus sation Awards Options/ Payouts sation
Principal Position Year ($) ($) (1) ($) ($) SARs (#) ($) ($)(3)
------------------ ---- ------- ------- ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Erle Nye, ..............
Chairman of the Board 1998 818,750 350,000 -- 541,250 -- 19,674 156,906
and Chief Executive of 1997 760,417 325,000 -- 499,375 -- 23,928 143,963
the Company 1996 723,333 185,000 -- 351,500 -- 0 117,908
David W. Biegler, ......
President and Chief 1998 617,500 102,500 -- 244,250 -- 0 174,208
Operating Officer of 1997 245,833 0 -- 0 -- 0 0
the Company 1996 0 0 -- 0 -- 0 0
H. Jarrell Gibbs, ...... 1998 443,750 97,500 -- 210,000 -- 7,390 77,213
Vice Chairman of the 1997 354,583 103,000 -- 185,125 -- 8,432 66,226
Board of the Company 1996 321,250 113,000 -- 189,500 -- 0 53,203
Michael J. McNally, ....
Executive Vice
President 1998 335,000 102,000 -- 183,000 -- 0 123,936
and Chief Financial 1997 279,167 105,000 -- 172,500 -- 0 103,630
Officer of the Company 1996 229,166 75,000 -- 131,250 -- 0 97,949
W. M. Taylor, .......... 1998 360,500 75,000 -- 157,800 -- 7,733 63,421
President, Generation 1997 339,583 83,000 -- 161,750 -- 9,343 59,948
Division--TU Electric 1996 312,500 83,500 -- 156,625 -- 0 49,530
</TABLE>
- ---------
(1) Amounts reported as Bonus in the Summary Compensation Table are
attributable to the named officer's participation in the Annual Incentive
Plan (AIP). Elected corporate officers of the Company and its
participating subsidiaries with a title of Vice President or above are
eligible to participate in the AIP. Under the terms of the AIP, target
incentive awards ranging from 35% to 50% of base salary, and a maximum
award of 100% of base salary, are established. The percentage of the
target or the maximum actually awarded, if any, is dependent upon the
attainment of per share net income goals established in advance by the
Organization and Compensation Committee (Committee) as well as the
Committee's evaluation of the participant's and the Company's performance.
One-half of each such award is paid in cash and is reflected
9
<PAGE>
as Bonus in the Summary Compensation Table. Payment of the remainder of the
award is deferred under the Deferred and Incentive Compensation Plan (DICP)
discussed hereinafter in footnote (2).
(2) Amounts reported as Long-Term Compensation in the Summary Compensation
Table are attributable to the named officer's participation in the DICP.
Elected corporate officers of the Company and its participating
subsidiaries with the title of Vice President or above are eligible to
participate in the DICP. Participants in the DICP may defer a percentage
of their base salary not to exceed a maximum percentage determined by the
Committee for each Plan year and in any event not to exceed 15% of the
participant's base salary. Salary deferred under the DICP is included in
amounts reported as Salary in the Summary Compensation Table. The Company
makes a matching award (Matching Award) equal to 150% of the participant's
deferred salary. In addition, one-half of any AIP award (Incentive Award)
is deferred and invested under the DICP. The Matching Awards and Incentive
Awards are subject to forfeiture under certain circumstances. Under the
DICP, a trustee purchases Company common stock with an amount of cash
equal to each participant's deferred salary, Matching Award and Incentive
Award, and accounts are established for each participant containing
performance units (Units) equal to such number of common shares. DICP
investments, including reinvested dividends, are restricted to Company
common stock. On the expiration of the applicable maturity period (three
years for the Incentive Awards and five years for deferred salary and
Matching Awards), the values of the participant's accounts are paid in
cash based upon the then current value of the Units; provided, however,
that in no event will a participant's account be deemed to have a cash
value which is less than the sum of such participant's deferred salary
together with a 6% per annum (compounded annually) interest equivalent
thereon. The maturity period is waived if the participant dies or becomes
totally and permanently disabled and may be extended under certain
circumstances.
Incentive Awards and Matching Awards that have been made under the DICP are
included under Restricted Stock Awards in the Summary Compensation Table
for each of the last three years. As a result of these awards,
undistributed Incentive Awards and Matching Awards made under the Plan in
prior years, and dividends reinvested thereon, the number and market value
of such Units at December 31, 1998 (each of which is equal to one share of
common stock) held in the DICP accounts for Messrs. Nye, Biegler, Gibbs,
McNally and Taylor were 46,827 ($2,186,236), 5,895 ($275,223), 19,572
($913,768), 13,162 ($614,501) and 16,724 ($780,802), respectively.
The Long-Term Incentive Compensation Plan (LTICP) is a comprehensive,
stock-based incentive compensation plan providing for discretionary grants
of common stock-based
10
<PAGE>
awards, including restricted stock. Outstanding awards to named executive
officers vest over a three year period and such executive officers may earn
from 0% to 200% of the number of shares awarded based on the Company's
total return to shareholders over such three year period compared to the
total return provided by the companies comprising the Standard & Poor's
Electric Utility Index. Dividends are paid and reinvested on such stock
awards at the same rate as dividends on the Company's common stock. As a
result of restricted stock awards under the LTICP, and dividends reinvested
thereon, the number of shares of restricted stock and the value of such
shares at December 31, 1998 held for Messrs. Nye, Biegler, Gibbs, McNally
and Taylor were 46,441 ($2,168,214), 7,177 ($335,076),10,554 ($492,740),
23,220 ($1,084,084) and 8,443 ($394,183), respectively.
Salary deferred under the DICP is included in amounts reported as Salary in
the Summary Compensation Table. Amounts shown in the table below represent
the number of shares purchased under the DICP with such deferred salaries
for 1998 and the number of shares awarded under the LTICP:
Long-Term Incentive Plans--Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Deferred and Incentive
Compensation Plan Long-Term Incentive Compensation Plan
----------------------- ----------------------------------------------------
Number of Performance Number of Performance
Shares, or Other Shares, or Other
Units or Period Until Units or Period Until Estimated Future Payouts
Other Maturation Other Maturation ----------------------------
Name Rights (#) or Payout Rights (#) or Payout Minimum (#) Maximum (#)
---- ---------- ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Erle Nye................ 3,041 5 Years 22,000 3 Years 0 44,000
David W. Biegler........ 2,254 5 Years 7,000 3 Years 0 14,000
H. Jarrell Gibbs........ 1,789 5 Years 5,000 3 Years 0 10,000
Michael J. McNally...... 1,288 5 Years 11,000 3 Years 0 22,000
W. M. Taylor............ 1,316 5 Years 4,000 3 Years 0 8,000
</TABLE>
The amounts reported under LTIP Payouts in the Summary Compensation Table
represent payouts maturing during such years of earnings on deferred salary
under the DICP in prior years.
(3) Amounts reported as All Other Compensation in the Summary Compensation
Table are attributable to the named officer's participation in certain
plans and as otherwise described hereinafter in this footnote.
Under the Employees' Thrift Plan of the Texas Utilities Company System
(Thrift Plan) all employees of the Company or any of its participating
subsidiaries may invest up to
11
<PAGE>
16% of their regular salary or wages in common stock of the Company, or in
a variety of selected mutual funds. Under the Thrift Plan, the Company
matches a portion of an employee's contributions in an amount equal to 40%,
50% or 60% (depending on the employee's length of service) of the first 6%
of such employee's contributions. All matching amounts are invested in
common stock of the Company. The amounts reported under All Other
Compensation in the Summary Compensation Table include these matching
amounts which, for Messrs. Nye, Biegler, Gibbs, McNally and Taylor amounted
to $5,760, $3,840, $4,800, $3,840 and $5,760, respectively, during 1998.
The Company has a Salary Deferral Program (Program) under which each
employee of the Company and its participating subsidiaries whose annual
salary is equal to or greater than an amount established under the Program
($96,370 for the Program Year beginning April 1, 1998) may elect to defer a
percentage of annual base salary, or any bonus or other special cash
compensation for a period of seven years, for a period ending with the
retirement of such employee, or for a combination thereof. Effective with
the Program Year beginning April 1, 1998, such deferrals may be up to a
maximum of 50% of the employee's annual salary and/or 100% of the
employee's bonus or other special cash compensation. The Company makes a
matching award, subject to forfeiture under certain circumstances, equal to
100% of up to the first 8% of salary deferred under the Program. Prior to
April 1, 1998, deferrals under the Program were limited to up to 10% of the
employee's salary and the Company made a matching award equal to 100% of
the employee's salary deferral. Salary and bonuses deferred under the
Program are included in amounts reported under Salary and Bonus,
respectively, in the Summary Compensation Table. Deferrals made after April
1, 1998, are credited with earnings or losses based on the performance of
investment alternatives selected by each participant. Deferrals made prior
to April 1, 1998, are, at the end of the applicable maturity period,
credited with the greater of the actual earnings of the Program assets, or
the average yield during the applicable maturity period of U.S. Treasury
Notes having a maturity of ten years. At the end of the applicable maturity
period, the trustee for the Program distributes the deferrals and the
applicable earnings in cash. The distribution is in a lump sum if the
applicable maturity period is seven years. If the retirement option is
elected, the distribution is made in twenty annual installments.
Individuals who were participating in the Program on March 31, 1998, were
given a one time opportunity to elect (1) to continue to have the
provisions of the Program relating to permitted deferrals, matching awards,
investments and calculation of earnings in effect prior to April 1, 1998,
apply to their future Program participation; or (2) to have the Program
provisions relating to investments and calculation of earnings apply to
their entire Program account, including deferrals and matching
contributions which had been made prior to April 1, 1998. The Company is
financing the retirement portion of the Program through the purchase of
corporate-
12
<PAGE>
owned life insurance on the lives of the participants. The proceeds from
such insurance are expected to allow the Company to fully recover the cost
of the retirement option. During 1998, matching awards, which are included
under All Other Compensation in the Summary Compensation Table, were made
for Messrs. Nye, Biegler, Gibbs, McNally and Taylor in the amounts of
$69,375, $37,400, $37,325, $28,300 and $30,590, respectively.
Under the Company's Split-Dollar Life Insurance Program (Insurance
Program), split-dollar life insurance policies are purchased for elected
corporate officers of the Company and its participating subsidiaries with a
title of Vice President or above, with a death benefit equal to four times
their annual Insurance Program compensation. New participants vest in the
policies issued under the Insurance Program over a six year period. The
Company pays the premiums for these policies and has received a collateral
assignment of the policies equal in value to the sum of all of its
insurance premium payments. Although the Insurance Program is terminable at
any time, it is designed so that if it is continued, the Company will fully
recover all of the insurance premium payments it has made either upon the
death of the participant or, if the assumptions made as to policy yield are
realized, upon the later of fifteen years of participation or the
participant's attainment of age sixty-five. During 1998, the economic
benefit derived by Messrs. Nye, Biegler, Gibbs, McNally and Taylor from the
term insurance coverage provided and the interest foregone on the remainder
of the insurance premiums paid by the Company amounted to $81,771, $7,968,
$35,088, $8,309 and $27,071, respectively.
In connection with the acquisition of ENSERCH, the Company entered into an
employment agreement with Mr. Biegler which provides for a minimum annual
salary of $600,000, minimum annual cash incentive compensation for 1997 of
$330,000 and certain severance benefits. In accordance with the agreement,
a supplemental incentive compensation payment of $125,000 was made to Mr.
Biegler and is included under All Other Compensation in the Summary
Compensation Table. The agreement terminates in August 1999.
An amount of $83,487 is included in the All Other Compensation column of
the Summary Compensation Table for Mr. McNally for 1998 representing
additional compensation that the Company agreed to pay Mr. McNally incident
to his employment with the Company in lieu of payments he would have
received from a prior employer.
As a part of the ENSERCH acquisition, options to purchase the common stock
of ENSERCH which had been granted to various employees of ENSERCH were
converted into options to acquire common shares of the Company. The table
below shows, for each
13
<PAGE>
of the named officers, the information specified with respect to exercised,
exercisable and unexercisable options under all existing stock option plans,
converted into shares of the Company's common stock into which such options
became exercisable at the time of the ENSERCH acquisition.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares December 31, 1998 December 31, 1998
Acquired on Value (#) ($)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Erle Nye................ 0 0 0 0 0 0
David W. Biegler........ 26,555 314,033 129,778 0 2,907,112 0
H. Jarrell Gibbs........ 0 0 0 0 0 0
Michael J. McNally...... 0 0 0 0 0 0
W. M. Taylor............ 0 0 0 0 0 0
</TABLE>
The Company and its subsidiaries maintain retirement plans (TU Retirement
Plan) which are qualified under applicable provisions of the Internal Revenue
Code of 1986, as amended (Code). Annual retirement benefits under the
traditional defined benefit formula of the TU Retirement Plan, which applied
to each of the named officers, are computed as follows: for each year of
accredited service up to a total of 40 years, 1.3% of the first $7,800, plus
1.5% of the excess over $7,800, of the participant's average annual earnings
during his or her three years of highest earnings. Amounts reported under
Salary for the named officers in the Summary Compensation Table approximate
earnings as defined by the TU Retirement Plan without regard to any
limitations imposed by the Code. Benefits paid under the TU Retirement Plan
are not subject to any reduction for Social Security payments but are limited
by provisions of the Code. As of February 28, 1999, years of accredited
service under the TU Retirement Plan for Messrs. Nye, Biegler, Gibbs, McNally
and Taylor were 36, 1, 36, 2 and 31, respectively.
14
<PAGE>
TEXAS UTILITIES PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
----------------------------------------------------------------------
Remuneration 20 25 30 35 40
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 14,688 $ 18,360 $ 22,032 $ 25,704 $ 29,376
100,000 29,688 37,110 44,532 51,954 59,376
200,000 59,688 74,610 89,532 104,454 119,376
400,000 119,688 149,610 179,532 209,454 239,376
800,000 239,688 299,610 359,532 419,454 479,376
1,000,000 299,688 374,610 449,532 524,454 599,376
1,400,000 419,688 524,610 629,532 734,454 839,376
1,800,000 539,688 674,610 809,532 944,454 1,079,376
</TABLE>
Before the ENSERCH acquisition, Mr. Biegler earned retirement benefits under
the Retirement and Death Benefit Program of 1969 of ENSERCH Corporation and
Participating Subsidiary Companies (ENSERCH Retirement Plan) which was merged
into, and became a part of, the TU Retirement Plan effective December 31,
1997. In connection with this plan merger, the TU Retirement Plan was amended
to provide that the retirement benefit of employees who were employed by
ENSERCH Corporation or one of its subsidiaries participating in the ENSERCH
Retirement Plan on August 5, 1997, and as of the last full pay period of 1997,
will equal the sum of (1) their accrued benefit under the ENSERCH Retirement
Plan through the last pay period of 1997 and (2) their accrued benefit under
the TU Retirement Plan beginning with the first pay period of 1998; provided
that the aggregate retirement benefit earned under the traditional defined
benefit plan formula of the plans can be no less than the retirement benefit
which would have been earned had such employees remained under the ENSERCH
Retirement Plan for their entire careers. Amounts reported for Mr. Biegler
under Salary and Bonus in the Summary Compensation Table approximate earnings
as defined by the ENSERCH Retirement Plan without regard to any limitations
imposed by the Code. As of February 28, 1999, Mr. Biegler had 30 years of
accredited service under the ENSERCH Retirement Plan.
15
<PAGE>
ENSERCH PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------------
Remuneration 20 25 30 35 40 45
- ------------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 12,831 $ 16,039 $ 19,246 $ 22,454 $ 23,704 $ 24,954
100,000 30,331 37,914 45,496 53,079 55,579 58,079
200,000 65,331 81,664 97,996 114,329 119,329 124,329
400,000 135,331 169,164 202,996 236,829 246,829 256,829
800,000 275,331 344,164 412,996 481,829 501,829 521,829
1,000,000 345,331 431,664 517,996 604,329 629,329 654,329
1,400,000 485,331 606,664 727,996 849,329 884,329 919,329
1,800,000 625,331 781,664 937,996 1,094,329 1,139,329 1,184,329
</TABLE>
The Company's supplemental retirement plans (Supplemental Plan) provide for
the payment of retirement benefits which would otherwise be limited by the
Code or the definition of earnings in the TU Retirement Plan or the ENSERCH
Retirement Plan, as applicable. Under the Supplemental Plan, retirement
benefits are calculated in accordance with the same formula used under the
applicable qualified plan, except that, with respect to calculating the
portion of the Supplemental Plan benefit attributable to service under the TU
Retirement Plan, earnings also include AIP awards (50% of the AIP award is
reported under Bonus for the named officers in the Summary Compensation
Table). The tables set forth above illustrate the total annual benefit payable
at retirement under the TU Retirement Plan and the ENSERCH Retirement Plan,
respectively, inclusive of benefits payable under the Supplemental Plan, prior
to any reduction for a contingent beneficiary option which may be selected by
participants.
The following information contained under the headings Organization and
Compensation Committee Report on Executive Compensation and Performance Graph
is not to be deemed to be (i) incorporated by reference into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934 (Securities
Acts) or (ii) "soliciting material" or "filed" with the Securities and
Exchange Commission within the meaning of Item 402(a)(9) of SEC Regulation S-K
of the Securities Acts.
16
<PAGE>
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors
(Committee) is responsible for reviewing and establishing the compensation of
the executive officers of the Company. The Committee consists of all of the
nonemployee directors of the Company and is chaired by James A. Middleton. The
Committee has directed the preparation of this report and has approved its
contents and submission to the shareholders.
As a matter of policy, the Committee believes that levels of executive
compensation should be based upon an evaluation of the performance of the
Company and its officers generally, as well as in comparison to persons with
comparable responsibilities in similar business enterprises. Compensation
plans should align executive compensation with returns to shareholders with
due consideration accorded to balancing both long-term and short-term
objectives. The overall compensation program should provide for an appropriate
and competitive balance between base salaries and performance-based annual and
long-term incentives. The Committee has determined that, as a matter of policy
to be implemented over time, the base salaries of the officers will be
established at the median, or 50th percentile, of the top ten electric
utilities in the United States and that opportunities for total direct
compensation (defined as the sum of base salaries, annual incentives and long-
term incentives) to reach the 75th percentile, or above, of such utilities
will be provided through performance-based compensation plans. Such
compensation principles and practices have allowed, and should continue to
allow, the Company to attract, retain and motivate its key executives.
In furtherance of these policies, a nationally recognized compensation
consultant has been retained since 1994 to assist the Committee in its
periodic reviews of compensation and benefits provided to officers. The
consultant's evaluations include comparisons to the largest utilities as well
as to general industry with respect both to the level and composition of
officers' compensation. The consultant's recommendations including the Annual
Incentive Plan, the Long-Term Incentive Compensation Plan and certain benefit
changes have generally been implemented. The Annual Incentive Plan, which was
approved by the shareholders in 1995, is generally referred to as the AIP and
is described in this report as well as in footnote 1 on pages 9 and 10 of this
proxy statement. The Long-Term Incentive Compensation Plan, referred to as the
Long-Term Plan or LTICP, was approved by the shareholders in 1997 and is
described in this report as well as in footnote 2 on pages 10 and 11 of this
proxy statement.
In recent years, the compensation of the officers of the Company has
consisted principally of base salaries, the opportunity to participate in the
Deferred and Incentive Compensation Plan (referred to as the DICP and
described in footnote 2 on pages 10 and
17
<PAGE>
11 of this proxy statement), the opportunity to earn an incentive award under
the AIP and, in certain instances, awards of performance-based restricted
shares under the Long-Term Plan. Benefits provided under the DICP and the AIP
have represented a substantial portion of officers' compensation, and the
value of future payments under the DICP, as well as the value of the deferred
portion of any award under the AIP, is directly related to the future
performance of the Company's common stock. It is anticipated that performance-
based incentive awards under the AIP and the Long-Term Plan, will, in future
years, continue to constitute a substantial percentage of the officers' total
compensation.
Certain of the Company's business units have developed separate annual and
long-term incentive compensation plans. Generally those plans focus on the
results achieved by those individual business units and the compensation
opportunities provided by those plans are considered to be competitive in the
markets in which those units compete. Officers may not participate in both the
traditional incentive compensation plans as discussed herein and the business
unit plans. None of the named officers participate in the individual business
unit plans.
The AIP is administered by the Committee and provides an objective framework
within which annual Company and individual performance can be evaluated by the
Committee. Depending on the results of such performance evaluations, and the
attainment of the per share net income goals established in advance, the
Committee may provide annual incentive compensation awards to eligible
officers. The evaluation of each individual participant's performance is based
upon the attainment of individual and business unit objectives. The Company's
performance is evaluated, compared to the ten largest electric utilities
and/or the electric utility industry, based upon its total return to
shareholders and return on invested capital, as well as other measures
relating to competitiveness, service quality and employee safety. The
combination of individual and Company performance results, together with the
Committee's evaluation of the competitive level of compensation which is
appropriate for such results, determines the amount, if any, actually awarded.
The Long-Term Plan, which is also administered by the Committee, is a
comprehensive stock-based incentive compensation plan under which all awards
are made in, or based on the value of, the Company's common stock. The Long-
Term Plan provides that, in the discretion of the Committee, awards may be in
the form of stock options, stock appreciation rights, performance and/or
restricted stock or stock units or in any other stock-based form. The purpose
of the Long-Term Plan is to provide performance-related incentives linked to
long-term performance goals. Such performance goals may be based on individual
performance and/or may include criteria such as absolute or relative levels of
total shareholder return, revenues, sales, net income or net worth of the
Company, any of its subsidiaries, business units or other areas, all as the
Committee may determine. Awards
18
<PAGE>
under the Long-Term Plan are expected to constitute the principal long-term
component of officers' compensation.
In establishing levels of executive compensation at its May 1998 meeting,
the Committee reviewed various performance and compensation data, including
the performance measures under the AIP and the report of its compensation
consultant. Information was also gathered from industry sources and other
published and private materials which provided a basis for comparing the
largest electric and gas utilities and other survey groups representing a
large variety of business organizations. Included in the data considered were
the comparative returns provided by the largest electric and gas utilities as
represented by the returns of the Standard & Poor's Electric Utility Index
which are reflected in the graph on page 21. In 1997, TU Electric, the
Company's principal subsidiary, was the largest electric utility in the United
States as measured by megawatt hour sales and, compared to other electric
utilities in the United States, was fifth in electric revenues, fifth in total
assets, fourth in net generating capability, sixth in number of customers and
ninth in number of employees. Compensation amounts were established by the
Committee based upon its consideration of the above comparative data and its
subjective evaluation of Company and individual performance at levels
consistent with the Committee's policy relating to total direct compensation.
At its meeting in May 1998, the Committee provided awards of performance-
based restricted stock under the Long-Term Plan to certain officers, including
the Chief Executive. The future value of those awards will be determined by
the Company's total return to shareholders over a three year period compared
to the total return for that period of the companies comprising the Standard &
Poor's Electric Utility Index. Depending upon the Company's relative return
for such period, the officers may earn from 0% to 200% of the original award
and their compensation is, thereby, directly related to shareholder value.
Awards granted in May 1998 contemplate that 200% of the original award will be
provided if the Company's total return is in the 81st percentile or above of
the returns of the companies comprising the Standard & Poor's Electric Utility
Index and that such percentage of the original award will be reduced as the
Company's return compared to the Index declines so that 0% of the original
award will be provided if the Company's return is in the 40th percentile or
below of returns provided by the companies comprising the Index. These awards,
and any awards that may be made in the future, are based upon the Committee's
evaluation of the appropriate level of long-term compensation consistent with
its policy relating to total direct compensation.
In May 1998 the Committee increased Mr. Nye's base salary as Chief Executive
to an annual rate of $850,000 representing a $75,000 or 9.7% increase over the
amount established for Mr. Nye in May of 1997. Based upon the Committee's
evaluation of
19
<PAGE>
individual and Company performance, as called for by the AIP, the Committee
also provided Mr. Nye with an AIP award of $700,000 compared to the prior
year's award of $650,000. The Committee also awarded 22,000 shares of
performance-based restricted stock to Mr. Nye. Under the terms of the award,
Mr. Nye can earn from 0% to 200% of the award depending on the Company's total
return to shareholders over a three-year period (April 1, 1998 through March
31, 2001) compared to the total return provided by the companies comprising
the Standard & Poor's Electric Utility Index. This level of compensation was
established based upon the Committee's subjective evaluation of the
information described in this report.
In discharging its responsibilities with respect to establishing executive
compensation, the Committee normally considers such matters at its May meeting
held in conjunction with the Annual Meeting of Shareholders. Although Company
management may be present during Committee discussions of officers'
compensation, Committee decisions with respect to the compensation of the
Chairman of the Board and Chief Executive and the President are reached in
private session without the presence of any member of Company management.
Section 162(m) of the Code limits the deductibility of compensation which a
publicly traded corporation provides to its most highly compensated officers.
As a general policy, the Company does not intend to provide compensation which
is not deductible for federal income tax purposes. Awards under the AIP in
1996 and subsequent years as well as awards under the Long-Term Plan are
expected to be fully deductible, and the DICP and the Salary Deferral Program
have been amended to require the deferral of distributions of amounts earned
in 1995 and subsequent years until the time when such amounts would be
deductible. Awards provided under the AIP in 1995 and distributions under the
DICP and the Salary Deferral Program which were earned in plan years prior to
1995, may not be fully deductible but such amounts are not expected to be
material.
Shareholder comments to the Committee are welcomed and should be addressed
to the Secretary of the Company at the Company's offices.
Organization and Compensation Committee
James A. Middleton, Chair Margaret N. Maxey
Derek C. Bonham (since November 1998) J. E.
William M. Griffin Oesterreicher
Charles R. Perry
Kerney Laday Herbert H.
Richardson
20
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock to
the S&P 500 Index and S&P Electric Utility Index for the last five years. The
graph assumes the investment of $100 at December 31, 1993 and that all
dividends were reinvested. The amount of the investment at the end of each year
is shown in the graph and in the table which follows.
Cumulative Total Returns
for the Five Years ended 12/31/98
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
-----------------------------------
<CAPTION>
1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Texas Utilities................................. 100 81 112 117 126 150
- --------------------------------------------------------------------------------
S&P 500 Index................................... 100 101 139 171 228 293
- --------------------------------------------------------------------------------
S&P Electric Utility Index...................... 100 86 113 113 143 166
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
APPROVAL OF INCREASE OF AUTHORIZED
SHARES AND STOCK SPLIT
The Board of Directors has unanimously approved, subject to shareholder
approval, an amendment of the Restated Articles of Incorporation to (1)
increase the number of authorized shares of common stock of the Company from
500,000,000 to 1,000,000,000 and (2) split the common stock of the Company, at
such time, if any, on or before December 31, 2000 as the Board of Directors
may determine, by changing each issued share into no more than two shares. The
full text of the proposed amendment is set forth in Exhibit A attached to this
proxy statement.
As of February 28, 1999, the Company had 282,332,819 shares of common stock
outstanding, making a two for one stock split impossible without an increase
in the number of authorized shares. The Board of Directors believes that it is
desirable that the Company have the flexibility to issue a substantial number
of shares of common stock. The availability of additional shares will enhance
the Company's flexibility in connection with possible future actions, such as
corporate mergers and acquisitions, stock dividends and splits, and employee
benefit programs. The Board of Directors will have full authority to issue the
entire amount of authorized but unissued common stock for such purposes and on
such terms as it may determine without further shareholder action unless
required by applicable laws, regulations or stock exchange requirements. There
are currently no arrangements or agreements for the issuance of the additional
shares of authorized common stock other than the proposed stock split, the
Company's Direct Stock Purchase and Dividend Reinvestment Plan and stock-based
employee benefit plans. Shareholders do not have any preemptive right to
subscribe for or purchase any additional shares of common stock that may be
issued. Future issues may, therefore, have a dilutive effect on earnings per
share, voting power and other interests of shareholders.
The increase in authorized shares could have an anti-takeover effect. For
example, if the Company were the subject of a hostile takeover attempt, shares
of authorized but previously unissued common stock could be used to dilute the
stock ownership of parties attempting the takeover or could be sold to
purchasers who might assist the Board of Directors in opposing such a bid,
thereby potentially increasing the cost of a takeover. In February 1999, the
Board of Directors adopted a share rights plan pursuant to which shareholders
were given rights to purchase the Company's Series A Preference Stock
(Rights). The Rights have certain anti-takeover effects. Unless and until
certain events occur, the Rights are not exercisable and trade with shares of
the common stock. Upon becoming exercisable, the Rights could cause
substantial dilution to the holdings of any party engaged in a takeover
attempt that has not been negotiated with the Board of Directors. The
availability of defensive strategies could discourage unsolicited takeover
22
<PAGE>
attempts, thereby limiting the opportunity for the shareholders to realize a
higher price for their shares. The Board of Directors is not aware of any
attempt, or contemplated attempt, to acquire control of the Company.
The Board of Directors anticipates that the stock split, if effected, will
cause the market price for the common stock to be reduced so that it is in a
range more attractive to investors, particularly individuals, and may result
in a broader market for the shares.
If the stock split is effected, each shareholder of record at the record
date determined by the Board of the Directors for the stock split would
automatically become the holder of, and be entitled to receive a certificate
or certificates for, additional shares of common stock for shares of common
stock owned of record by such shareholder. If the stock split is effected in a
manner that would create fractional shares, shareholders will be entitled to
receive cash in lieu of any such fractional shares in an amount determined by,
or in accordance with procedures established by, the Board of Directors.
The Company has been advised by tax counsel that the proposed stock split
would not result in any gain or loss or realization of taxable income to
owners of common stock under existing U.S. federal income tax law except for
the receipt of cash, if any, in lieu of fractional shares. The cost basis for
tax purposes of each new share and each retained share would be equal to a
fraction of the cost basis for tax purposes of the retained share immediately
prior to the stock split. In addition, the holding period for the additional
shares issued pursuant to the stock split would be deemed to be the same as
the holding period for the retained shares of common stock. The laws of
jurisdictions other than the United States may impose income taxes on the
issuance of the additional shares and shareholders are advised to consult
their tax advisors.
The Board of Directors will be authorized by the amendment to determine an
effective date for the stock split at any time on or before December 31, 2000,
or they may determine not to effect the stock split.
The Board of Directors Recommends a Vote FOR the Approval of this Amendment.
23
<PAGE>
SELECTION OF AUDITORS
The Audit Committee has nominated to the Board of Directors for its
consideration the firm of Deloitte & Touche LLP to act as independent auditors
for the Company for the year 1999 and, subject to the approval of shareholders
at the annual meeting, the Board has selected that firm to audit the books of
account and records of the Company and to make a report thereon to the
shareholders. The persons named in the proxy will, unless otherwise instructed
thereon, vote your shares in favor of the following resolution which will be
submitted for consideration:
RESOLVED that the selection of the firm of Deloitte & Touche LLP,
independent auditors, to audit the books of account and records of the
Company for the year 1999, to make a report thereon "To the Shareholders of
Texas Utilities Company," and to perform other services, be, and it hereby
is, approved.
The firm of Deloitte & Touche LLP, independent auditors, has been the
outside auditors for the Company since its organization in 1996 and for Texas
Energy Industries, Inc. (formerly Texas Utilities Company) since its
organization in 1945, including the last fiscal year. Representatives of
Deloitte & Touche LLP are expected to be present at the annual meeting and
will have the opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions.
The Board of Directors Recommends a Vote FOR the Approval of Auditors.
24
<PAGE>
OTHER BUSINESS
Other than as stated herein, the Board of Directors does not intend to bring
any business before the meeting and it has not been informed of any matters
that may be presented to the meeting by others. However, if any other matters
properly come before the meeting, it is the intent of the Board of Directors
that the persons named in the proxy will vote pursuant to the proxy in
accordance with their judgment in such matters.
Dated: April 5, 1999
Whether or not you will be able to attend the meeting,
please sign and return the accompanying proxy promptly.
25
<PAGE>
EXHIBIT A
Increase in Authorized Shares
RESOLVED that Article VI of the Restated Articles of Incorporation of the
Company be, and hereby is, amended by restating the first sentence to read as
follows:
"The total number of shares that may be issued by the Corporation is one
billion fifty million (1,050,000,000) shares, of which fifty million
(50,000,000) shares are classified as serial preference stock having the
par value of $25 per share, and one billion (1,000,000,000) shares are
classified as common stock without par value"
Stock Split
RESOLVED that Article VI of the Restated Articles of Incorporation of the
Company be, and hereby is, amended effective as of such time on or before
December 31, 2000, if any, as the Board of Directors may determine, by adding
the following paragraph:
"Each share of common stock of the corporation issued and outstanding or
held in the treasury of the corporation immediately prior to the close of
business on [the date established for the stock split by the Board of
Directors] is changed into and reclassified as [a number, not to exceed
two, to be established by the Board of Directors] fully paid and
nonassessable shares of the common stock, without par value, and at the
close of business on such date, each holder of record of common stock
shall, without further action, be and become the holder of [a number, not
to exceed one, to be established by the Board of Directors] additional
share of common stock for each share of common stock held of record
immediately prior thereto as determined by the Board of Directors.
Effective at the close of business on such date, each certificate
representing shares of common stock outstanding or held in treasury
immediately prior to such time shall continue to represent the same number
of shares of common stock and as promptly as practicable thereafter, the
corporation shall issue and cause to be delivered to each holder of record
of shares of common stock at the close of business on such date an
additional certificate or certificates representing [a number, not to
exceed one, to be established by the Board of Directors] additional share
of common stock for each share of common stock held of record immediately
prior thereto."
A-1
<PAGE>
[TEXAS UTILITIES COMPANY LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
TIME:
Friday, May 14, 1999, at 9:30 a.m.
PLACE:
Bass Performance Hall
4th Street and Calhoun Street
Fort Worth, Texas 76102
Whether or not you will be able
to attend the meeting, please
sign and return the enclosed
proxy promptly so that you may
be represented at the meeting.
<PAGE>
P TEXAS UTILITIES COMPANY
R ENERGY PLAZA
O 1601 Bryan Street
X Dallas, TX 75201-3411
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Erle Nye and J.S. Farrington, and each of
them, Proxies with power to appoint a substitute, and hereby authorizes them to
represent and to vote all shares of common stock of Texas Utilities Company held
of record by the undersigned on March 15, 1999 at the annual meeting of
shareholders of the Company to be held in the Bass Performance Hall, 4th Street
and Calhoun Street, Fort Worth, Texas, on Friday, May 14, 1999, and at any
adjournments thereof, and to vote, as directed on the reverse side of this card,
on all specified matters coming before said meeting, and in their discretion,
upon such other matters not specified as may come before said meeting.
(Continued, and to be signed and dated, on reverse side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
Please mark
your vote as X
indicated in
this example
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR
ALL NOMINEES AND FOR ITEMS 2 AND 3. FOR WITHHELD
1. Election of Directors:
NOMINEES:
DEREK C. BONHAM JAMES A. MIDDLETON
J.S. FARRINGTON ERLE NYE
WILLIAM M. GRIFFIN J.E. OESTERREICHER
KERNEY LADAY CHARLES R. PERRY
MARGARET N. MAXEY HERBERT H. RICHARDSON
For, except vote withheld from the following nominee(s):
- ---------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of amendment to Restated Articles
of Incorporation
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of Auditors - Deloitte & Touche LLP
- --------------------------------------------------------------------------------
--------
NOTE: Please sign names exactly as printed
hereon. Joint owners should each sign.
In signing as attorney, administrator,
executor, guardian, officer, partner or
trustee, please give full title as such.
Receipt is acknowledged of the Annual
Report of the Company for 1998, notice of
meeting and proxy statement.
Signature(s) Date
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